NON COMPETE OVERVIEW

NON-COMPETE AGREEMENTS AND RESTRICTIVE COVENANTS

OVERVIEWNon compete agreements (non-competes) are made using different methods. Sometimes, it is contained in an employment handbook that an employee is required to sign separately. Other employers draft a separate contract or include it in an employment agreement or contract.

The overall goal of the non-compete agreement is to prevent an employee or ex-employee from using an employer's confidential information for his or her personal benefit or for the benefit of a subsequent employer. These contracts also prohibit an employee or ex-employee from competing against his present or former employer. Non-competes are designed to protect only employers' confidential business information and only for the period necessary to do so.

EMPLOYER'S LEGITIMATE BUSINESS INTERESTSNon compete agreements can only protect employer's legitimate business interests. An employer has an interest in limiting or preventing an employee from taking advantage of the relationships or information learned as a result of his or her employment to compete against the employer. An employer also has the right to protect its customer lists so that a departing employee does not contact them on his or her own behalf, or on behalf of a new employer. To ensure that only protectible information is restricted, employers should consider only certain employees as candidates for non-compete agreementsthose that have access to protectible information. Such employees may include those in research and development; sales staff; engineers and others engaged in design and drafting work; customer relations employees; employees involved in advertisements, product promotion and customer service; and accounting and finance department staff. Employee such as cleaning staff, janitors, and others who have no access to confidential information may not necessarily need to be covered, depending on the nature of the employer's business.

ENFORCEMENT OF NON-COMPETE AGREEMENTIn general, courts look view non-competes unfavorably because they tend to deny or limit the ability of workers to earn a living or compete in general. However, courts will enforce them when the terms are reasonable; limited in duration and geographical scope; narrowly tailored to only protect information that is sensitive, limited to confidential information that the employer has a legitimate interest in protecting. In deciding this also, courts try to balance the employee's right to compete and earn a living against the employer's need to protect its business interests. Courts also consider whether the employer provided something to the employee in exchange for signing the non-compete. Overall, non-competes that are reasonable and narrowly tailored to protect only legitimate interests of an employer are enforced by the courts. Those non competes that are viewed as oppressive, unfair or overly restrictive to an employee are not upheld unless the compensation given to the employee in return justifies such restriction.

BREAKING/BREACHING A NON-COMPETE AGREEMENTA breach of or failure to comply with the terms of a non-compete agreement can result in a lawsuit that can be costly to defend. Sometimes, an employee finds that he cannot get another job or be employed in an industry at all as a result of a non-compete clause that he or she signed without much thought. Even though courts can strike down the terms of an unreasonable non-compete agreement, the cost of bringing or defending such lawsuits are high. Where an employee needs relief from the terms of a non-compete, it is advisable to retain an attorney to seek a possible resolution of the non-compete with the employer. In other words, an attorney can attempt to find a settlement or other resolution that may permit the employee to be relieved in part or in full from the obligations of the non-compete. If an agreement is reached ahead of time, an expensive lawsuit will likely be prevented and the employee may accept a new job without the fear of a lawsuit against him or her and the new employer.

MANDATORY ARBITRATION/BINDING MEDIATION OF NON COMPETE AGREEMENTSTo eliminate the high cost of litigating non-compete agreements, some employers include a clause that requires that any breach, conflict or problems with the agreement be submitted to binding mediation or mandatory arbitration. This significantly reduces the cost of litigating the agreements and sometimes results in a quicker resolution also. With arbitration or mediation, the parties select an acceptable individual or entity who will review the position of each side and come up with a decision that will bind the parties without going to a court. The mediators are typically retired judges, attorneys or business consultants who are familiar with the law and employer's industry.

Our experienced firm attorneys are available to consult with individuals and corporations in matters relating to restrictive covenants and non compete agreements.